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Fortuna Silver’s San Jose Mine Can Handle Lower Silver Prices - CEO

By Alex Létourneau of Kitco News
Tuesday September 16, 2014 10:30 AM

Denver (Kitco News) - Having just completed an expansion to produce 2,000 tons per day at its San Jose mine, in Oaxaca, Mexico, Fortuna Silver Mines Inc. (TSX:FVI) (NYSE:FSM) is now eyeballing an expansion to 3,000 tpd.

At the 25th Denver Gold Forum, Jorge Ganoza, president and chief executive officer of Fortuna Silver, spoke with Kitco News, highlighting the company’s revised and ambitious expansion and production schedule.

“We have launched the engineering studies to expand our mine to 3,000 tpd - if we go to 3,000 tpd, San Jose will be able to produce 6.5 million ounces of silver and 50,000 ounces of gold,” he said. “We expect to conclude the feasibility studies for expansion by year-end and our goal is to have construction going in 2015, delivering in 2016.”

Jorge Ganoza, president and chief executive officer of Fortuna Silver

Asked if the current silver prices may deter the company from going through with its expansion, Ganoza said the San Jose mine can operate profitably with lower silver prices.

“We have to focus on what we can control,” Ganoza said. “For the first half of the year, our all-inclusive cash costs at San Jose were $15 an ounce, net of by-product. The San Jose mine, in that all-inclusive figure, carries close to $14 million in tailings expansion and other one-time projects.

“We’re quite confident our mines are resilient to lower silver prices, he continued. “San Jose is a mine that can operate below $10. Our cash costs at that mine are $4, but the delta between all-inclusive costs at $15 is $14 million in one-timers.”

Fortuna Silver has been growing its San Jose mine systematically since it began commercial production in September 2011.

An updated mineral resource estimate as of June 30, showed measured and indicated resources totaled 5.8 million tons, showing a 42% increase in contained silver ounces to 42.3 million ounces and a 29% increase in contained gold ounces to 334,000 ounces.

Inferred resources totaled 7.1 million tons with a 67% increase in contained silver ounces at 58.9 million ounces and a 47% increase in contained gold ounces at 401,000 ounces. The company is currently updating its mineral reserves estimate.

The company is also heavily exploring its Trinidad North Discovery, which has been delivering high silver grades and strong gold grades since its discovery was announced in October 2013.

“The deposit remains wide open to the north, at depth and in the central portion of the deposit as well,” Ganoza said. “So we’re continuing with an aggressive drill program and we expect to be able to extend mineralization.”

The San Jose mine is expected to produce roughly 4 million ounces of silver and 30,400 ounces of gold in 2014.

The company’s Caylloma Mine, located in Peru, is expected to meet its 2014 production guidance of 2 million ounces of silver and 1,900 ounces of gold.

Inside Look at Fortuna Silver's San Jose Mine

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By Alex Létourneau of Kitco News aletourneau@kitco.com
Follow Alex Letourneau @alex_letourneau




Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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